ISLAMABAD, June 1, 2025: Pakistan’s salaried class individuals majorly contribute to the annual tax revenue, with some estimates showing that tax collection from the salaried class is five time that of tax collected from exporters or retailers. However, salaried class is also the most vulnerable to inflation and economic cycles.
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To counter these effects, the Government of Pakistan is preparing Budget FY2025-26 proposals offering much needed relief to the salaried individuals. On Sunday, a positive development came in this regard when the International Monetary Fund (IMF) and Pakistan reportedly neared an agreement to reduce income tax rates for the salaried class in the upcoming budget.
During a round of intense talks between the Fund and Pakistan’s chief revenue collection agency, the Federal Board of Revenue (FBR), on Friday, the IMF board has approval lowering of income tax rates across multiple slabs, for salaried individuals. The tax slabs, however, are expected to remain the same.
Market analysts are estimating that, if implemented, this reduction in taxes will provide relief of nearly Rs. 56 to Rs. 60 billion to Pakistan’s salaried class in the upcoming fiscal year. While the details are yet to be confirmed, some media reports suggest that the FBR has proposed lowering the tax rate on the first income slab (between Rs. 600,000 and Rs. 1,200,000) from currently 5% to 1%. For higher income slabs, the proposal suggests to cut down the current tax rate down by 2.5%. This means that even the highest tax slab, currently taxed at 35% will be brought down to 32.5%.
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While the news of IMF’s approval for tax reduction is positive, there are now concerns of the IMF team becoming less compromising, after the government announced earmarking 2,000MW of electricity for Bitcoin generation.
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The government neither consulted the IMF team or terms of the bailout program for this announcement, nor took approval from the Ministry of Energy and the National Electric Power Regulatory Authority (NEPRA).
